Trump has ‘very positive’ meeting with Warsh to discuss chairing Fed – Politico


Kevin Warsh is pictured here. | AP Photo

Kevin Warsh, speaking to the media about his report on transparency at the Bank of England, in London in 2014. | Alastair Grant/AP

President Donald Trump met with former Federal Reserve Governor Kevin Warsh on Thursday at the White House about taking the top job at the central bank, two people familiar with the meeting said Friday.

One person described the meeting as “very positive” and said Warsh presented himself to Trump as eager to bring reforms to the central bank, an issue people close to the matter say is very important to the president.

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The meeting, first reported by The Wall Street Journal, came as the White House begins to focus more closely on the Fed chair position. Current Chair Janet Yellen’s term ends in February. Trump has said he is considering renominating Yellen, but Republicans on Capitol Hill believe the president will look to make a change.

Warsh, who served at the Fed during the financial crisis and is now a visiting fellow at Stanford’s Hoover Institution, remains at the top of the list of possible replacements for Yellen, but Trump is not yet close to making a final decision.

One of the sources who confirmed the meeting with Warsh said that current Fed Governor Jerome Powell is also now close to the top of the list and is a favorite of Treasury Secretary Steven Mnuchin, who is helping guide the Fed chair selection process.

Powell is a Republican who worked in the Treasury Department in the George H.W. Bush administration. He also spent eight years as a partner at private equity firm Carlyle Group. He has been heading regulatory policy at the central bank since Daniel Tarullo left the Fed in April.

Warsh has one strong ally in his corner, his billionaire father-in-law Ronald Lauder, who met Trump in college and remains a confidant. Warsh is married to Jane Lauder, granddaughter of cosmetics magnate Estée Lauder.

Warsh’s odds of taking over at the Fed rose after the initial front-runner, National Economic Council Director Gary Cohn, criticized Trump’s response to the violence in Charlottesville, Virginia. Cohn’s comments angered Trump and led some in the White House to suggest that the former Goldman Sachs president now has no chance at becoming Fed chair.

But others close to the president say Cohn could re-emerge as a strong candidate if he manages to help shepherd a sweeping tax reform package to Trump’s desk by late this year or early next year. Advisers often rise and fall in Trump’s estimation, though he never forgets criticism.

People close to Cohn say the NEC director does not believe he is out of the running for the Fed chair job. Trump has also said publicly that he likes and admires Yellen. If he doesn’t renominate her, it would break with historic precedent in which new presidents typically offer sitting Fed chairs another term. Yellen has met with first daughter Ivanka Trump and developed a good relationship with Mnuchin.

But Republicans on Capitol Hill want Trump to nominate a new chair and say privately that they are confident he will do so.

The search is somewhat complicated by the fact that Trump has described himself as a fan of low interest rates and may not want a more traditionally conservative Fed chair taking over in 2018 heading into the midterm elections and Trump’s potential reelection campaign in 2020. A more hawkish Fed chair could look to raise rates more quickly, slowing economic growth, especially if a big tax cut package threatens to stoke inflation.

Warsh could thread this needle by assuring Trump that he would support bringing more political oversight to the Fed, while not diverging too much from the central bank’s stance of slowly and methodically raising rates and withdrawing the extraordinary measures it took to boost the economy after the financial crisis.

Trump regularly touts the rising stock market as a sign of his success and did so again in a tweet on Friday. Market watchers say the Fed’s slow pace of policy moderation is helping keep stocks elevated.

Other candidates mentioned as possible Fed chairs including former BB&T CEO John Allison and Stanford University economist John Taylor.

Warsh, a former investment banker at Morgan Stanley, is just 47 and some people close to Trump say the president was at least initially concerned that the Hoover Institution fellow might be too young for the job. But Warsh comes across as a very polished executive, and the meeting with Trump could help ease the president’s concern about his relative youth.

Warsh, who has a law degree from Harvard, is also not a classically trained economist, a plus with a president who prefers smooth-talking executives to wonks. Warsh served on Trump’s Strategic & Policy Forum before that panel was disbanded in the wake of the president’s comments about Charlottesville.

In his role as a visiting fellow at Hoover, Warsh wrote a paper with a group that included two other Fed chair hopefuls — Taylor and Columbia University economist Glenn Hubbard — defending Trump’s goal of sustained 3 percent annual GDP growth.

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